VF to sell Nautica, double down on North Face

Dive Brief:

VF Corp. announced plans to sell its Nautica brand. And while there is no definitive agreement, management is "actively engaged with several parties," CEO Steven Rendle said on a conference call with analysts to discuss fourth quarter financial results. Consequently, VF Corp. has classified the assets and liabilities of the brand's business as "held-for-sale" and is counting its sales in "discontinued operations" for accounting purposes, the company said last week.
VF Corp. last year acquired workwear apparel brand Williamson-Dickie, which contributed two percentage points to its revenue growth last year, according to the company statement. Full year 2017 revenue from continuing operations rose 7% to $11.8 billion.
In 2016, the company sold its contemporary brands businesses, including 7 for All Mankind, Splendid and Ella Moss, to Israeli apparel company Delta Galil Industries for $120 million and in 2017, VF unloaded its Licensed Sports Group to Fanatics, which included the JanSport brand. Going forward, management said it will build on momentum for its Vans and North Face brands.

Dive Insight:

VF Corp. has been making assertive moves to adjust its portfolio to improve performance in an era of challenged apparel sales buffeted by changing consumer tastes and shopping behavior.

Investors in recent years had become impatient with the company's status quo and began urging management to add to its stable of brands. That had analysts buzzing about a possible acquisition of Lululemon or Lands' End. But executives pushed back and for the most part, except for its purchase of Williamson-Dickie last year, the company has pared down its portfolio as it sought to balance earnings growth and free cash flow.

Cash flow from operations last year reached some $1.5 billion and the company returned about $1.9 billion to shareholders through dividends and share repurchases, the company also said in a press release. For what it deems this transition quarter ending March 31, the company is forecasting revenue of $2.9 billion and adjusted earnings of 65 cents per share.

In a statement, VF Chairman and CEO Steve Rendle said he is pleased with the results and promised more momentum this year, as investments accelerate growth. "VF's fourth quarter results were stronger than we expected as growth continues to accelerate across core dimensions of our portfolio," he said. "We remain in the early phase of a multi-year journey to become a purpose led, agile, consumer centric organization."

Management is focused in particular on growing the North Face brand, which saw global revenue grow 6% in the quarter. Wholesale revenue increased 4% and the direct-to-consumer business increased 8%, including a 14% growth in digital. "While the growth in The North Face was below our outlook, we accelerated the timing of several initiatives to improve the quality of sales and reposition the brand back to its rightful place as the premium global outdoor lifestyle brand," Rendel said.